WASHINGTON: US President Barack Obama has weighed in the ongoing debate over policy paralysis in India, calling for a new wave of economic reforms in the world's largest democracy to reverse a worsening investment climate.

In an unusual intervention, Obama, 50, who is facing a tough re-election battle in November this year against Republican rival Mitt Romney, quoted US business leaders as telling him that it was "still too hard to invest in India".

The US president, who has made the outsourcing practices of Bain Capital-the private equity company once headed by Romney that has been accused of shipping thousands of jobs to China and India-one of his key election planks, urged India to open up sectors such as retail and insurance in an interview.

"In too many sectors, such as retail, India limits or prohibits the foreign investment that is necessary to create jobs in both our countries, and which is necessary for India to continue to grow," Obama said.

A spokesman for the Prime Minister's Office in Delhi, Pankaj Pachauri, declined to comment when reached on Sunday evening.

Foreign investors can own 26% in Indian insurance companies while foreign investment in multi-brand retail is banned, though government leaders have said the prohibition may soon be lifted. Companies such as Walmart Stores Inc and Tesco Plc have been clamouring to enter the Indian market for a long time.

Reactions in India Mixed

Obama answered a wide range of questions on the state of Indian and global economies, Indo-Pak ties and American strategy in the Asia-Pacific region.

Many in the American business community, "one of the great champions of the US-India partnership", have expressed concerns that the investment climate in India is deteriorating, he said.

Obama noted that the Indian economy "continues to grow at an impressive rate", and said to some extent the slower growth in Asia's third-largest economy is a reflection of troubles in Europe and a slow recovery in the US.

Reactions in India were mixed with some attributing Obama's intervention to domestic compulsions.

"I do not agree with President Obama's assessment of the Indian economic situation. He is merely repeating what industrialists in the US and Europe have been saying about India. It does not reflect reality. There has been a bit of a policy paralysis here, but we are much better off than most countries in the developed world. His statements don't surprise me as they are populist and are being made at a time the US will soon go to polls," said Sajjan Jindal, vice-chairman, Jindal South-West.

Ads released by the Democratic Party have slammed Romney for outsourcing jobs to India during his tenure as Massachusetts governor. Obama's public rhetoric has been consistently hostile to outsourcing to India and China though he has done little in practice to prevent it.

Others agreed with the leader of the world's oldest democracy.

"We have to create an environment to attract foreign funds to support the depreciating rupee. We are not getting the benefit of falling oil prices as our currency is weak. Whatever attracts FDI is welcome. FDI in retail is welcome as these (US) companies with their expertise and supply-chain management skills would help reduce commodity prices. This would be beneficial for the common man," said Keki Mistry, vice-chairman and managing director, HDFC Ltd.

Refraining from prescribing any solutions for India's current economic difficulties, Obama said, "it is not the place of the United States to tell other nations, including India, how to chart its economic future. That is for Indians to decide".

Obama noted that domestic consensus in India was in favour of another wave of reforms. "There appears to be a growing consensus in India that the time may be right for another wave of economic reforms to make India more competitive in the global economy."

Economic growth in India plummeted to the lowest since 2003 for the quarter ended March 31, 2012.

The US president added that "as India makes the difficult reforms that are necessary, it will continue to have a partner in the United States".

"It is important, though, to put this in the context of India's incredible growth and development in recent decades," he said.

Obama pointed out that India had lifted tens of millions of people out of poverty to create one of the world's largest middle classes.

"And even with the recent challenges, the Indian economy continues to grow at an impressive rate. The Indian people have displayed a remarkable capacity to meet India's challenges," he said.

Describing Prime Minister Manmohan Singh as "my friend and partner with whom I have worked closely", Obama said he valued the insights of the Indian leader at various international for a, including the recent G-20 meeting in Mexico.